The Supreme Court quashed criminal proceedings against a non-executive director having no financial responsibilities or involvement in the day-to-day operations of the company in a cheque bounce case after finding that the complaints did not contain any specific averments against him.

The Apex Court was considering the appeals against the impugned common Judgment of the Bombay High Court dismissing the petitions under Section 482 of the Code of Criminal Procedure, 1973 (CrPC) seeking quashing of criminal proceedings initiated against the Appellant under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 (NI Act).

The Division Bench comprising Justice B. V. Nagarathna and Justice Satish Chandra Sharma asserted, “The complaints do not contain any specific averments detailing how the Appellant was responsible for the dishonoured cheques.”

Senior Advocate Neeraj Kumar Jain represented the Appellant while Advocate Samrat Krishnarao Shinde represented the Respondents.

Factual Background

The Appellant was appointed as an additional independent non-executive director and subsequently designated as an independent non-executive director. Notedly, the Appellant had no role in the financial operations or key management of the company. The The company allegedly availed two loans from Respondent No. 1 during 2016-2017, amounting to ₹56,00,000 and ₹70,00,000 respectively. As repayment, the company issued various cheques, which were dishonoured due to insufficient funds. The Appellant neither signed nor authorised the issuance of these cheques.

Out of the four criminal cases, the demand notices were initially not addressed to the Appellant. It was only in the second set of demand notices that the Appellant’s name appeared, along with all directors, independent directors, non-executive directors, and additional directors. The Appellant resigned from his position but was arrayed as an accused in the complaints filed under section 138 of the NI Act alleging dishonour of cheques issued by the company. The High Court dismissed the appellant’s quashing plea. Aggrieved thereby, the Appellant approached the Apex Court.

Reasoning

The Bench, at the outset, reiterated that a mere designation as a director does not conclusively establish liability under section 138 read with section 141 of the NI Act. Liability is contingent upon specific allegations demonstrating the director’s active involvement in the company’s affairs at the relevant time.

Referring to various judgments including Pooja Ravinder Devidasani v. State of Maharashtra, (2014), the Bench said, “The legal precedents cited above, including Pooja Ravinder (supra), clearly hold that non-executive directors cannot be held liable under section 138 NI Act unless specific evidence proves their active involvement.” On a perusal of the complaints, the Bench opined that the Appellant was neither a signatory to the dishonoured cheques nor was he actively involved in the financial decision-making of the company. Moreover, he resigned from the post of independent non-executive director, duly notified through Form DIR-11 and DIR-12 to the Registrar of Companies.

While noting that there weren’t any specific allegations against him, the Bench said, "Petitioner’s role in the accused company was limited to that of an independent non-executive director, with no financial responsibilities or involvement in the day-to-day operations of the company. Furthermore, he was not responsible for the conduct of its business."

“In view of the above observations, the Appellant cannot be held vicariously liable under section 141 of the NI Act. The complaints do not meet the mandatory legal requirements to implicate him”, the Bench said while allowing the appeals and quashing the proceedings registered against him.

Cause Title: Kamalkishor Shrigopal Taparia v. India Ener-gen Private Limited & Anr. (Neutral Citation:2025 INSC 223)

Appearance:

Appellant: Senior Advocate Neeraj Kumar Jain, AOR Umang Shankar, Advocates Aniket Jain, Sanjay Singh,Vidyut Kayarkar

Respondents: Advocates Samrat Krishnarao Shinde,Siddharth Dharmadhikari, AOR Aaditya Aniruddha Pande

Click here to read/download Judgment







Supreme CourtJustice BV NagarathnaChief Justice Satish Chandra SharmaNegotiable Instruments ActCheque Dishonour

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.